Silver (XAG) Daily Forecast: Prices Drop Below $30 as Safe-Haven Appeal Fades

By:

Arslan Ali

Published: Jun 3, 2024, 06:51 GMT+00:00

Key Points:

Silver starts the week bearish around $29.87, influenced by expectations of a Fed rate cut.
Gaza ceasefire hopes reduce safe-haven demand for silver, contributing to its downward trend.
Traders await crucial US macro data and central bank decisions impacting the silver market.

In this article:

Silver

-0.32%

Market Overview

Despite expectations of a Fed rate cut and a weaker US dollar, silver (XAG/USD) continued its downward trend, starting the week bearish around $29.87 and hitting an intraday low of $29.85.

This decline is attributed to risk-on market sentiment driven by hopes for a Gaza ceasefire, announced by US President Joe Biden, reducing demand for safe-haven assets like silver.

Looking ahead, traders await crucial US macro data, including the Nonfarm Payrolls (NFP) report on Friday. Additionally, central bank events, such as the Bank of Canada (BoC) decision on Wednesday and the European Central Bank (ECB) meeting on Thursday, will also impact the silver market.

Silver Price Dynamics Amid Risk-On Sentiment

The US dollar has been losing traction amid growing expectations that the Federal Reserve will reduce interest rates later this year, driven by signs of easing inflationary pressures in the United States.

The recent US inflation report, which met expectations, reinforced the anticipation of Fed rate cuts. As a result, the US dollar is weakening, which typically boosts silver prices as investors seek alternative safe-haven assets.

The US Bureau of Economic Analysis reported that the Personal Consumption Expenditures (PCE) Price Index increased by 0.3% in April, staying at 2.7% annually as expected. The Core PCE Price Index, excluding volatile items like food and energy, also met predictions, rising by 2.8% annually.

However, the weakening US dollar did not boost the price of silver, as risk-on sentiment overshadowed its safe-haven appeal, leading to a limited impact on silver prices despite the anticipated Fed rate cuts and easing inflationary pressures in the US.

Geopolitical Caution and Silver Prices Amid Gaza Ceasefire Optimism

Traders are cautious due to US President Joe Biden’s announcement of a new ceasefire plan for Gaza, which has sparked optimism but tempered aggressive bullish bets on commodities.

The ceasefire plan brings hope for stability in the region, but traders are wary of placing strong bullish bets until there is more clarity and confirmation regarding its implementation and impact on geopolitical tensions.

As a result, the positive news of a ceasefire plan has undermined the safe-haven appeal of silver, leading to a neutral or slightly negative impact on its prices as traders adopt a more cautious stance.

Short-Term Forecast

Silver is expected to remain bearish, potentially dropping further below $30, driven by risk-on sentiment and geopolitical factors.

Silver (XAG/USD) Price Forecast: Technical Outlook

Silver – Chart

Silver (XAG/USD) is trading at $29.92, down 0.60% in the 4-hour timeframe. Key price levels include a pivot point at $30.05. Immediate resistance levels are at $30.67, $31.57, and $32.33.

On the support side, immediate support is at $29.43, followed by $28.80 and $28.27. Technical indicators show the 50-day Exponential Moving Average (EMA) at $31.09 and the 200-day EMA at $30.36.

The formation of candles below $30 suggests significant bearish strength. Additionally, silver has crossed below the 200-day EMA and closed with a bearish engulfing candle, indicating further downward potential.

Given these technical indicators, silver may continue to drop towards the next support level. The outlook remains bearish below $30, while a break above this level could shift the bias to bullish.

About the Author

Arslan Aliauthor

Arslan is a finance MBA and also holds an MPhil degree in behavioral finance. An expert in financial analysis and investor psychology, Arslan uses his academic background to bring valuable insights about market sentiment and whether instruments are likely to be overbought or oversold.